Is Obamacare sinking in Texas? Or just facing more growing pains?
Health care spending nationwide will hit a new high this year, rising 4.8 percent, the government said last week. Over l million Texans who buy insurance on HealthCare.gov can only dream of having it so good.
Blue Cross Blue Shield of Texas, which has about half the state’s exchange customers, wants to increase premiums almost 60 percent for 2017. Scott and White Health Plan wants to ratchet up premiums over 30 percent, and Cigna, 24 percent. Aetna and Oscar are planning double-digit increases, too.
UnitedHealth. the country’s largest insurer, is pulling out of the exchange business in Texas and over a dozen other states.
Many consumers already feel squeezed by the cost of insurance, along with high deductibles and co-pays. In Texas, 85 percent of exchange Customers get federal subsidies to offset premiums, and federal officials say shopping round usually uncovers an affordable plan. But subsidies won’t necessarily keep pace with increases at Blue Cross and Scott and White, whose final prices will probably be announced this fall.
Broker Bob Garrison of Insurance Connection USA in Denton said that this week, a young woman with two children called to discuss dropping the family’s Blue Cross plan for a few months. She and her husband pay about $1,300 L month and can’t face more sticker shock, he said.
“When your health insurance is bigger than the mortgage, something’s wrong,” Garrison said.
It’s not working for Blue Cross, either.
In justifying its rate increase to state regulators, the company said it paid $1.26 in claims for every $1 in premiums collected last year. For the state’s largest insurer, that resulted in a loss of $770 million in the individual marketplace. And Blue Cross is projecting another loss this year for its exchange business.
To some, this is further evidence that the Affordable Care Act is unsustainable. Higher premiums are likely to drive away potential enrollees, especially healthier people, and that could lead to a down- ward spiral.
“Pretty soon, health insurance on the exchange will be a good deal only for the very sick,” said Devon Herrick, senior fellow at the National Center for Policy Analysis in Dallas. “More healthy folks will drop out and pay the fine. That appears to be happening in Texas.”
Others see the price spikes – and big losses at insurers – as part of the evolution of a new insurance market. What’s happening with Obamacare is reminiscent of other pro- grams, such as Medicare Ad- vantage, said Ashraf Shehata of the consulting firm KPMG.
“It gets better,” he said, adding that it typically takes three to five years for a new insurance market to stabilize.
“Texas is in the middle of many changes right now, and it kind of feels like the valley of despair,” said Shehata, who specializes in health care. “But l’ve seen other states figure out how to be successful.” That typically entails more coordinated care among providers, keeping new customers in the system and controlling expenses, including pharmacy bills. He cited gains in parts of New York and Minnesota and said Dallas-area providers are heading down the right path already.
Eventually, such progress is likely to be imported into the employer-sponsored market, where about half of Americans get health coverage. On the exchange, plan designs have embraced narrower networks of doctors and hospitals.
For 2016, Blue Cross dropped its PPO on the exchange and offered only HMO plans, which have fewer providers and little or no coverage outside the network. Judging from its rate increases, the strategy hasn’t bent the cost curve yet.
In its state filing, Blue Cross said medical claims were significantly higher than expected. But insurers have also complained about customers dropping coverage and jumping back in later. People can cite special circumstances, such as job loss or marriage, to enroll at any time, not just during open enrollment. Apparently, many are waiting until they’re sick to get coverage.
Special enrollment customers used 55 percent more medical services, the Blue Cross and Blue Shield Association said earlier this year. One-fourth to one-third of exchange customers signed up through special enrollment, a spokesman for the parent company of Blue Cross Blue Shield of Texas told The New York Times.
Federal officials are trying to tighten the rules on continuous coverage without rejecting people who have a legitimate change in circumstances.
“They’re trying to balance access to coverage with what’s rational for insurance companies,” said Elizabeth Carpenter of Avalere Health, a consulting firm.
She expects regulators to scrutinize special enrollment more closely and strengthen rules to discourage exits. Enrollment in the exchanges is well short of some early projections, and Texas sign-ups are trailing the national average and some other large states, notably Florida.
In Texas, an estimated 18 percent of people are still uninsured, Blue Cross Blue Shield said in an email.
That’s hurting the health of the exchange market here. Some tweaks can be made by federal agencies, and Austin lawmakers could urge more Texans to participate – if they can get past the politics.
Other improvements, such as adding low-cost insurance options or changing the age bands for pricing, could set Obarmacare on a stronger course for the long term.
But there’s a tough hurdle: Those changes require approval from Congress. And that’s a no go, at least until the next president.